Chinese Economic Growth and Atmospheric Pollution: An Overview Jie He CERDI, Clermont-Ferrand David Roland-Holst UC Berkeley dwrh@berkeley.edu
Motivation Why we should care about this: 1. Chinese GHG emissions are already a significant regional externality and could be decisive on a global basis. 2. China s energy demand is rocking the tanker. 3. Because of its status as a populous DC, what happens in China in terms of sustainable living is of special significance. 2
Aerosol Optical Depth : April 21 NASA-TERRA Satellite; MODIS Inst Source: Y. Kaufman: 21, NASA-GSFC AOD (Unitless) 3
Source: Novakov, Ramanathan, Hansen,.. Sathaye, GRL, 22 4
Three Focal Points 1. Where is China along the path of energy dependence? 2. How might energy prices and policies influence its course? 3. How can we decompose the ensuing environmental effects? 5
Energy and GHG Trends in China Two contending perspectives: 1. Optimists point to falling coal intensity in the late 199s and massive technology infusion across the economy. 2. Others see resurgence of coal and overwhelming demand shifts in recent years, driven mainly by final consumption and completion of the process of modernization. 6
Reported Growth Rates of GDP and Commercial Energy Use in China Source: Logan:21 7
Chinese Steel: An Optimistic View 8
Chinese Steel: Reality Now below average, growing fast, and headed much higher Per capita consumption up 2.5 times in last decade Likely to more than double again in coming decade Even 15% annual growth would still be less than Korea in 1992 Annual Kilograms Per Capita Steel Production Oil Consumption Country 1992 21 2 China 59 132 95 Korea 499 89 271 Japan 635 575 4136 France 382 39 4366 United States 33 373 8141 9
Industrialization may be energyintensive, but affluence is much more so. Per Capita Steel and Energy (Chinese levels = 1) 1 Normalized Quantity 9 8 7 6 5 4 3 Hill Mountain 2 1 China Korea Japan France United States Countries Steel Oil 1
China: The Worlds 3 rd Largest Car Market by 21 11
Demographics of Vehicle Demand 12
Coal at the Foundaton, Oil at the Margin: Energy Composition by Type A. Energy preduction structure B. Total energy consumption 16 16 Ton of equivalent coal 14 12 1 8 6 4 2 1978 1985 199 1992 1994 Year 1996 1998 2 22 Ton of equivalent coal 14 12 1 8 6 4 2 1978 1985 199 1992 1994 Year 1996 1998 2 22 hydropow er natural gas crude oil coal 13
Tipping the Trade Balance: Energy Demand and Supply Composition 3 2 1 total export MTEC -1-2 198 1986 1988 199 1992 1994 1996 1998 2 total import total consumption total production -3 Year 14
Macro Efficiency Determinants 25 2 15 1 5 Energy production Energy consumption GDPPC industrial GDPPC SO2 emission Per capita energy consumption and production (kg equivalent oil/person) GDPPC and industrial GDPPC (1995 USD) Per capita SO2 emission (g/person) 1978 198 1982 1984 1986 1988 199 1992 1994 1996 1998 2 22 Year 15
China: Per Capita Waste Gas Emissions (1, cubic meters) Source: Aufhammer et al: 23 16
Projections to 225 We use a recursive dynamic CGE model to forecast trends for China over the next two decades. Around a calibrated baseline of consensus GDP growth, we evaluate the effects of rising oil prices. 17
Sectoral Output Composition 1% 8% Percentage 6% 4% 2% Service Construction Manufacture Agriculture % 1997 2 23 26 29 212 215 218 221 224 Year 18
Inverted Kuznets Curve? Real GDP and SO2 Emission Trends 6 12 5 4 3 2 1 1 8 6 4 2 SO2 Real GDP SO2 intensity 1997 1999 21 23 25 27 29 211 213 215 217 219 221 223 225 Real GDP (1^9 USD) SO2 emission (1^4 Tons) SO2 emission intensity (kg/1usd) Year 19
CO2 as the Hidden Dragon: Final Consumption Trends 1% 8% Percentage 6% 4% 2% Service Construcution Manufacture Agriculture % 1997 2 23 26 29 212 215 218 221 224 Year 2
Ills of Affluence 6 Emission intensity (Kg/1 USD) 5 4 3 2 1 Agriculture Manufacture Construction Service 1997 1999 21 23 25 27 29 211 213 215 217 219 221 223 225 Year Mfg reverses course because of electricity production. Services are about transportation. 21
Real Sources Of Emission Intensity 25 2 15 1 5 Year 3 25 2 15 1 5 1997 2 23 26 29 212 215 218 221 224 C o al in ten sity (T C E/m illo n U SD ) Petrol and coke intensity (TCE/millon USD) 18 16 14 12 1 8 6 4 2 O il in ten sity (T C E/m illo n U SD ) Year Agriculture Manufacture Construction Service 1997 21 25 29 213 217 221 225 Year 22
Composition of Environmental Incidence: Primary Drivers and the Pollution Troika Economic sources of pollution can be decomposed into three parts: 1. Growth effects expanding the envelope of economic activity. China s successes here are now legendary, and becoming almost surreal. 2. Composition effects shifting patterns of supply and demand around the surface of the envelope. Things will get much worse before they get better. 3. Technological change efficiency gains, bending the envelope. Here is the only unequivocally good news, driven mainly by coal use/distribution constraints and technology transfer. 23
Divisia Decomposition Results SO2 emission variation during 1997-225. Scale effect Composition effect Technique effect 25 25 25 1997-23 2 2 2 23-215 15 15 15 215-225 1 1 1 5 5 5 agricult ure Manufacturing Construction Services -5 agricult ure Manufacturing Construction Services -5-1 -15 24
Divisia Decomposition SO2 emission changes for some manufactures Composition effect 1794 5751 333 22 18 14 1 6 2 Oil Petrol and coke Electricity Textiles Wearing apparel Leather products Chem. Prod Other mineral prods Ferrous metals Motor vehicles Other trans. equips Electronic equipment Other mach & equip. Land transport Sea transport Air transport -2 Sectors 25
Crude Oil Absorption Trends 6 8 5 4 3 2 1 7 6 5 4 3 2 1 Oil consumption and import (1^6 USD) oil import total oil consumption import ratio in total consumption ratio of import (percentage) 1997 1999 21 23 25 27 29 211 213 215 217 219 221 223 225 Year 26
Conclusions China s economy has attained levels of growth and modernization that seemed beyond imagining only a generation ago. Along with its many successes in improving material living standards, however, have come new risks to sustainability and environmental quality. Without more effective emission control policies, China s economic growth will give rise to very significant SO 2 emission problems, especially in the period of 215-225. After a period of industrialization, structural transformation induces rapid expansions of energy-intensive final demand, mainly private electricity, heating, and transport services. To meet the needs of a consumer society, SO 2 emissions shift from the other manufacturing and service sectors into intermediate energy generation (electricity generation and petrol and coke sectors), and petroleum refining. Coal will be significantly replaced by relatively cleaner intermediate energy sources such as electricity, oil products and natural gas in manufacturing. Higher crude oil price may slow or even reverse this trend. Even these pessimistic results understate the the problem, since final consumption emissions are not even considered. What is to be done? A very good question. 27
Quo Vadis? 28